Too often, consumers are forced to shoulder a heavy financial burden, or even go without needed medicine, due to the high cost of brand-name drugs. Our research indicates that one significant cause is the practice called “pay for delay,” which inflates the drug prices paid by tens of millions of Americans.
In a pay-for-delay deal, a brand-name drug company pays off a would-be competitor to delay it from selling a generic version of the drug. Without any competition, the brand-name company can continue demanding high prices for its drug.
This list of 20 drugs known to be impacted by pay-for-delay deals represents the tip of the iceberg. Annual reports by the Federal Trade Commission (FTC) indicate that generic versions of as many as 142 brand-name drugs have been delayed by pay-for-delay arrangements between drug manufacturers since 2005.
However, because the details of these deals rarely become public, consumers have largely been kept in the dark about the extent of the problem. Information about these twenty specific drugs affected by pay-for-delay deals has been made public thanks to legal challenges brought by the FTC, consumer class action lawsuits, research by legal experts, and public disclosures by drug makers.
Key findings of our analysis of these 20 drugs impacted by pay-for-delay deals:
- This practice has held back generic medicines used by patients with a wide range of serious or chronic conditions, ranging from cancer and heart disease, to depression and bacterial infection.
- These payoffs have delayed generic drugs for five years, on average, and as long as nine years.
- These brand-name drugs cost10 times more than their generic equivalents, on average, and as much as 33 times more.
- Combined, these brand-name drug companies have made an estimated$98 billion in total sales of these drugs while the generic versions were delayed.
Impact of Pay for Delay on Consumers
While the specifics of pay for delay are only now beginning to be understood by the public, the consequences of this price-inflating practice are all too real for consumers and taxpayers.
The drug Provigil, prescribed for sleep disorders and multiple sclerosis-related fatigue, offers a case study: Experts expected a generic version of Provigil to go on the market in late 2005, but brand-name manufacturer Cephalon paid more than $200 million to four different generic drug manufacturers, who kept their generics off the market until 2012.2 In the meantime, many patients had to pay up to $1,200 each month for the drug, or manage without it.
In 2010, the FTC estimated that a pay-for-delay deal for a single drug could cost an individual consumer and their health plan an extra $4,590 over 17 months. Extended over the average five-year length of a pay-for-delay deal, that amounts to $16,200 in wasteful spending per patient, per drug, due to pay for delay.
This not only forces consumers to pay higher premiums and out-of-pocket costs, it also means that taxpayers foot higher drug bills in Medicare and other programs. The FTC estimates that these deals cost consumers and taxpayers $3.5 billion each year in higher drug costs.
But for drug companies, pay-for-delay deals can translate to a windfall in higher profits. As the CEO of Cephalon, the drug company that makes Provigil, reportedly said about the deal that kept generic Provigil off the market, “That’s $4 billion in sales that no one expected.”